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Key Takeaways Additional tax credits and deductions are available for small businesses to provide childcare benefits and paid family and medical leave.
Changes to taxes on overtime and tips may affect your record-keeping and payroll withholdings.
Some of the changes are retroactive to Jan. 1, 2025.
With nearly 900 pages and more than 100 tax-related provisions, H.R.1, the One Big Beautiful Bill Act, which was signed into law on July 4, 2025, has several important changes for small businesses to navigate. Payroll, employment tax and employee benefit changes are among the law’s key provisions, with some retroactively effective as of Jan. 1, 2025.
While the Department of the Treasury and the IRS are expected to provide further guidance on implementing certain provisions, there are steps small businesses can take now to prepare for potential impacts.
Tax credits for benefits offerings
For small businesses competing for talent, a comprehensive benefits strategy can help and often goes a long way in making employees feel valued. ADP’s latest benefits sentiment data shows that 78% of employees say they feel valued by their employer due to the medical benefits that are offered, while an even higher percentage (82%) feel valued by the non-medical benefits their employer provides. As you look for opportunities to extend employee benefits, consider the following changes:
Enhanced childcare credit: For small businesses, the Act increases employers’ tax credits for qualified expenses for employer-provided childcare. Covered expenses generally include the employer’s direct payments to qualified childcare facilities or caregivers, the costs of starting and running on-site childcare and a more limited credit for childcare referral services. Additionally, the Act allows small businesses to pool their resources to provide childcare to their employees and for businesses to use a third-party intermediary to facilitate childcare services on their behalf.
Increased paid family and medical leave credits: The employer tax credit for paid family and medical leave benefits was scheduled to expire at the end of this year. The Act makes the credit permanent. The Act also reduces the required length of employment for eligibility from one year to six months, increasing the number of employees covered. Beginning in 2026, employers will also be able to take a credit for amounts paid as premiums for qualifying insurance policies that pay employee wages for family and medical leave.
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